The Theory Behind the Long-Run Phillips Curve Relationship Is That

question 148

Multiple Choice

The theory behind the long-run Phillips curve relationship is that:

• A) people's expectations of future inflation are based on their most recent experience.
• B) people form expectations on the basis of all available information.
• C) monetary policy has real effects in the long-run.
• D) inflation stimulates the economy, and this outcome reduces the unemployment rate.
• E) prices are flexible in the long run, causing no relationship between unemployment and inflation.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to purchase at each price level.

Russian Government

The political and administrative structures governing the Russian Federation, including its executive, legislative, and judicial branches.

Default

The failure to fulfill an obligation, especially to repay a loan or appear in a court of law.

Open-Economy Macroeconomic

A branch of economics that studies how economies interact with other countries' economies in terms of trade, investment, and finance.